For Business · Advisory
Capital Gains Tax
The concessions that make a business sale tax-effective have conditions you must satisfy before you sign, not after.
Overview
The tax on a sale is decided long before settlement
The small business CGT concessions can reduce or eliminate the tax on a business sale, but each has conditions tested at the moment of the sale: the $6 million net asset value test or the $2 million turnover test, the active asset test, and for the 15-year exemption, age and retirement. By the time a contract is signed, most of those are fixed.
We review the position early, work out which concessions you can reach and what would need to change to reach the others, reconstruct the cost base while the records still exist, and time the contract so the gain falls in the year that suits. Where a pre-sale restructure helps, we do it far enough ahead that it is defensible.
How we help
- 01
Small business CGT concessions
The 15-year exemption, 50% active asset reduction, retirement exemption and rollover, tested against your position.
- 02
Main residence and the absence rule
Partial exemptions, the six years absence rule and periods of income production, calculated properly.
- 03
Cost base reconstruction
Purchase costs, capital improvements and holding costs assembled while the records still exist.
- 04
Timing across financial years
Contract date, not settlement date, determines the year. We model which side of 30 June suits you.
- 05
Pre-sale restructure review
Where an entity blocks a concession, restructured early enough that the arrangement stands up to scrutiny.
Resources
Key figures
- 50%
- General CGT discount
- $6 million
- Maximum net asset value test
- $2 million
- Small business turnover test
- $500,000
- Retirement exemption lifetime cap
The general discount requires the asset to be held for at least 12 months and is not available to companies. The 15-year exemption additionally requires continuous ownership and, where retiring, that you are at least 55.
Thinking about selling in the next few years?
The earlier we look, the more of the concessions are still available to you.
FAQ
Capital gains tax questions
On the contract date, not settlement. A contract signed on 29 June falls into that financial year even if money changes hands in August. It is one of the few levers still available late in a transaction.
Yes, and they apply in a set order. The general 50% discount comes first, then the 50% active asset reduction, then the retirement exemption or rollover against what remains. Applied together they often reduce the gain to nil.
The asset must have been used in a business for at least half the ownership period, or seven and a half years if owned longer than fifteen. Assets mainly deriving rent generally fail, which catches a lot of property held in a trading entity.
We reconstruct the cost base from contracts, conveyancing files, council records, loan documents and bank statements. It is slower and needs more evidence than good records would, but a reconstructed cost base is far better than none.
Possibly in part. The six years absence rule can preserve the exemption if the property was your main residence first and you did not claim another. Renting first and moving in later gives only a partial exemption.
Speak to an accountant
Free 30-minute consultation.
No obligation. We’ll review where you are and tell you what we’d do.
+61 451 114 862Book a consultationThis page is general information only. It does not take your circumstances into account. Speak to a registered tax agent before acting on anything here.
Related services
Often paired with CGT planning.
We’re here to help
Have a question? Tell us your story.
A qualified accountant replies within one business day.